Next Health Lawsuit – Missold Medical Equipment kickback Scheme Discussed

In the past two weeks, I’ve had people ask me about the lawsuit that took place at a diabetes supply company. The story is rather disturbing, to say the least. As you may know, there is a large lawsuit pending against the New York State Department of Health, and a Florida based company by the name of “ADA Diagnostic Medical Center”. Now, a little bit of background is in order for those who aren’t familiar with this issue; back in April of 2021, the federal government held a hearing in front of the Senate Commerce Committee.

Next Health Lawsuit

During this hearing, several topics were discussed which pertained to health care fraud. One of the topics of discussion was the so-called kickbacks. While some individuals have heard of “kickbacks”, they are not aware that this particular term actually encompasses a range of practices. For example, if a doctor or other medical professional gives a referral to a specific physician or clinic in return for money, this is considered a kickback. In this case, the doctor receives cash, and the patient gets treatment from the physician being referred to.

The State of Florida brought up a point during the hearing that would definitely give rise to the concept of kickbacks when it comes to sending kickbacks in the form of payment to medical professionals.

Florida is among several states that are currently involved in a lawsuit over this very matter. Specifically, this case involves a Florida resident who had her payments delayed and ultimately lost her lawsuit due to a lack of funds. So, what exactly is the “Dangerous Waste Syndrome”?

According to Florida: “The term refers to any fraudulent activity in which an individual other than the person paying for the goods or services, is benefited at the expense of another. Under the laws of many States, this type of fraud is punished by criminal charges. However, the fraudulent provider may also be penalized by civil liability law. Many states have laws that require the provider to reimburse the consumer for any goods or services received as a result of the fraud.” Further, “there is currently no nationwide definition of ‘fraudulent service,’ ” but most jurisdictions follow the common-law rule that fraud is an unwise use of property or credit.” Accordingly, Florida adds that a fraudulent service provider could be held liable for “fraudulent billing, collection, administration, garnishment, repossession, or misappropriation.”

At this point, you might be wondering what the difference is between kickbacks and a “fraudulent service” – and the answer is simple.

A kickback is an action taken against an individual or entity on the basis that the provider rendered a service for which payment was not received; the individual or entity then assert that the provider waived its rights by refusing to pay. Conversely, a “fraudulent service” is defined as rendering a service for which payment was received but the service was not received as part of that payment. In essence, a “fraudulent service” would be when an individual, entity, or government agency attempts to coerce the other party into accepting a waiver. In the United States, an individual who has engaged in fraudulent billing practices may be held liable for a civil penalty. Likewise, a government agency that has subjected an individual or entity to fraud may be held liable for a civil penalty.

The next “plaintiff” in the case of league v. adar group, is the Texas State Attorney General.

The Complaint asserts that the defendant violated Article 17 of the Texas Rules of Professional Responsibility (RPR) by failing to investigate and prosecute complaints within thirty days. According to the Complaint, the defendant failed to disclose that it had received a complaint concerning undue medical care and of its failure to respond timely to the complaint. The Complaint further contends that the adar group was a victim of medical malpractice and the result of this conduct was a breach in the duty of care owed to the adar group and the reasonable expectations of its customers.

The attorneys representing the defendant argue that the complaint is based on completely incorrect facts.

First, they argue that the adar group was not a victim of medical malpractice. Secondly, they argue that the complaint improperly name two different entities because the names of the entities do not accurately reflect the complaint’s meaning. Finally, they say that the complaint improperly utilsizes the term “fraudulent service” to describe what the adar group did not perform. In response, the defendants say that the complaint fails to show that any harm was caused and that there was no negligence on the part of the adar group. They further point out that the United States District Court for the Southern District of New York improperly allowed the complaint to move forward on the ground that the term “fraudulent service” was a misnomer because “the term itself indicates that the defendant intentionally commits acts of deceitful or improper conduct.”

In light of these arguments, the complaint was denied class certification and the complaint was dismissed. On appeal, however, a three-judge federal court panel reversed the dismissal, reasoning that although the plaintiff failed to establish liability, he did demonstrate that the defendant violated the FDCPA by having a kickback scheme. The panel also found that because the defendant repeatedly stated that it was not a defendant in this case, that statement was enough for class certification. The three judges then ordered a trial date to be held, and a jury trial was scheduled for later this year. The plaintiffs are considering an appeal of that decision to the full court.

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